The Fundamentals of Supplemental Pay Under the FLSA

Understand the FLSA's supplemental pay requirements when calculating overtime premiums and avoid costly errors.

Among the most common issues under the FLSA is the misconception that a nonexempt employee's hourly rate is the same as what the FLSA terms as the regular rate used in calculating overtime premiums. The regular rate must also include the varying forms of supplemental pay employers often use to compensate its employees in addition to their hourly pay. One frequent misunderstanding of supplemental pay under the FLSA involves the payment of bonuses, and many employers are unaware of the distinguishing factors that require certain bonuses to be included in calculating an employee's regular rate. The legal implications of these common misunderstandings and applications of supplemental pay can be costly should the employer not fully understand the FLSA's supplemental pay requirements when calculating overtime premiums. This topic helps those responsible for compensation policies and timekeeping and payroll practices understand the fundamentals of what constitutes supplemental pay and the best ways to properly calculate an employee's regular rate to avoid exposure to liability under the FLSA.